Arbeitspapier
Financial Instability and Optimal Monetary Policy Rule
This paper investigates the effect of financial instability on the design of monetary policy rule for a small open economy. We find evidence that optimal monetary policy rule reacts directly to financial imbalances and, as a result, to the real exchange rate movements. However, optimal rule would not react to the real exchange rate changes directly if central bank does not care about the financial instability. For a quantitative analysis, impulse responses of some macroeconomic variables and financial instability to the domestic productivity and foreign country output shocks, resulting from simulation, are also analysed in this paper.
- Language
-
Englisch
- Bibliographic citation
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Series: FIW Working Paper ; No. 42
- Classification
-
Wirtschaft
Monetary Policy
Financial Crises
- Subject
-
Financial instability
Optimal monetary policy rule
Real exchange rate
Open economy
- Event
-
Geistige Schöpfung
- (who)
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Sedghi-Khorasgani, Hossein
- Event
-
Veröffentlichung
- (who)
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FIW - Research Centre International Economics
- (where)
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Vienna
- (when)
-
2010
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Sedghi-Khorasgani, Hossein
- FIW - Research Centre International Economics
Time of origin
- 2010
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